David Einhorn's Greenlight Capital told clients that Tesla's stock should be performing much worse than it is.

Greenlight is short Tesla shares, which means it profits from a decline in the stock price.

"Tesla had an awful quarter both in its current results and future prospects," falling 6%, Greenlight wrote in a letter to investors. "We believe it deserved much worse."

Greenlight threw water on Tesla's driverless car plans, saying "autonomous driving may more likely reflect TSLA's willingness to put inadequately tested and dangerous products on the road rather than a true technological advantage."

David Einhorn's Greenlight Capital is sticking to its bet that Tesla's stock should be performing much worse than they are.

"Tesla (TSLA) had an awful quarter both in its current results and future prospects," Greenlight, a $7 billion hedge fund, wrote to clients in an October 24 letter reviewed by Business Insider. "In response, its shares fell almost 6%. We believe it deserved much worse."

The letter, which was signed "Greenlight Capital" rather than by Einhorn himself added: "So much went wrong for TSLA in the quarter that it is hard to only provide a brief summary."

Greenlight is short Tesla, which means it stands to gain as the stock falls. That bet has confounded Einhorn in the past, with the shares gaining almost 70% this year. The stock rose slightly Tuesday.

Here are the issues Greenlight highlighted in its October letter:

"Poor demand for its legacy vehicles and manufacturing challenges for the new Model 3. Notably, TSLA dramatically reduced its gross margin assumption for the September quarter and publicly blamed ramp-up costs for the new Model 3 sedan."

"More quietly, the company used the lower gross margin hurdle to offer incentives and to lower the cost of options on the Model S and Model X vehicles, and even offered significant markdowns on showroom models. Given the depth of the price cuts, we were surprised that demand for the Model S and Model X only improved modestly."

Specifically, Greenlight said that Tesla faces competition from established auto companies that "have decades of scale manufacturing experience."

Greenlight also threw water on Tesla's driverless car plans, writing: "Some of TSLA's presumed market lead in areas like autonomous driving may more likely reflect TSLA's willingness to put inadequately tested and dangerous products on the road rather than a true technological advantage."